Aussie dollar boosted by Chinese central bank

The Australian dollar is higher versus US dollar today after the People’s Bank of China provided liquidity to Chinese banks.

The Australian dollar is trading just above the important $0.93 level as traders are now less concerned about the credit crunch in China.

The mining boom in Australia has largely been driven by China’s demand for minerals so the two economies are positively correlated. The borrowing rate on the overnight market for Chinese banks has declined for four consecutive days as the People’s Bank of China added liquidity, lifting the Australian dollar as a strong Chinese economy is good for Australia.

Today’s final Q1 GDP reading showed that the US economy grew by just 1.8% in the first quarter of 2013, when economists were expecting a figure of 2.4%. Weaker-than-expected growth could mean that the Federal Reserve keeps it bond-buying programme in place. The suggestion by Ben Bernanke last week that the stimulus package could be reduced put the Australian dollar under pressure, but today’s growth report could drive the Australian dollar towards the $0.95 mark.

Spot FX AUD/USD (DFB) chart

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